Established in 1957, the China Import and Export Fair (“Canton Fair”), co-hosted by the Ministry of Commerce of China, Guangdong Provincial Government and organized by China Foreign Trade Center, is held biannually every April and October. It is the most famous platform for China’s international trade and hosts an enormous variety of exhibitors and buyers. The Canton Trade Fair has one of the highest business turnovers of all the trade shows in China and potentially worldwide.

Over the years, IP protection at the Canton Fair has been an important issue. In this article, we will introduce the IP protection mechanism in the Canton Fair and how IP owners can incorporate evidence gathering and IP enforcement in the Fair into their overall IP protection strategy. We will also cover the impact of the COVID pandemic on the Canton Trade Fair and how IP owners should adapt.

Introduction to the IP Protection Mechanism

IP protection first began at the 71^st Canton Fair in 1992 when the Ministry of Foreign Economics and Trade issued a notice reporting that more than 200 trademark infringement cases had been handled by the organizer of the Canton Fair and other administrative enforcement authorities. With increase of foreign trade, IP infringement of trademarks, copyright and patents by the annual exhibitors were also on the increase. At the 81^st Canton Fair in 1997, the organizers set up a “Special IP Group” to be in charge of handling IP infringement complaints and implementing new guidelines. The Special IP Group drove the development of IP protection at the Canton Fair and was one of the earliest specialized IP protection agencies for trade fairs in China.

After China joined the WTO in 2001, the formation of an IP protection system at the Canton Fair had become a major issue. In 2007, The China Foreign Trade Center issued the “Implementation Details for the Complaints about and Settlement Provisions for Infringement of Intellectual Property Rights”. This was to regulate the complaint process, evidence requirements, and punishments for IP infringement at the Canton Fair. This regulation applied to IP protection in all exhibitions in China until it was replaced by the current “Complaint and Settlement Provisions for Suspected Intellectual Property Infringement in the Canton Fair” (amended in 2017) (“the Provisions”).

Under the Provisions, the Canton Fair organizer will set up a Complaint Station for IP rights and trade disputes and invite administrative law enforcement officials and experts to guide and assist investigations and settlements of IP infringement complaints on site. IP holders can submit complaints to the Complaint Station, and one complaint can include several IP rights. The trade delegations and Chambers of Commerce are requested to proactively check their respective exhibits and promotional materials before and during the Canton Fair and cooperate with the Complaint Center to educate and deal with exhibitors suspected of IP infringement. All exhibitors are requested in advance to prepare their IP or authorization documents in case of requests by the Complaint Station.  

Due to the limited time for each Canton Fair session (as it is divided into 3 five-day phases), the Complaint Station only accepts trademark, copyright and design patent disputes that are not legally complex. If the IP infringement can be preliminarily established, the exhibitor will be requested to remove the infringing products and promotional materials from display. For serious and repeat offenders, they can be disqualified from attending the Canton Fair, and the affiliated trade delegation will face a reduction of exhibition booths for future sessions.

At the 126^th Canton Fair in October 2019, the Complaint Station accepted 440 IP infringement complaints against 580 companies, among which 241 were preliminarily identified as conducting infringement[1]. The following chart shows the types of complaints filed in the two sessions in 2019.

* Source: https://k.sina.com.cn/article_1655444627_62ac1493020015tx1.html?from=local

(1,151 complaints were filed in total including 640 patent, 232 trademark and 58 copyright infringement complaints.)

In 2020, against the backdrop of the global pandemic of coronavirus and drastically reduced global trade, the 127^th and the 128^th Canton Fair were held online.

(Source : http://www.gz.gov.cn/xw/jrgz/content/post_5807817.html )

Survey and Enforcement in the Canton Fair

The Guangzhou administrative enforcement authority assisted the Complaint Station both online and offline and dealt with 262 patent infringement complaints and 155 trademark infringement cases for IP holders from more than 10 countries, including USA, Japan, and France.

Intelligence gathering and evidence fixing

With many B2B opportunities for exhibitors, the Canton Fair is a platform for IP holders to gauge new infringement trends in their specific industries as well as collecting evidence of IP infringement through surveys.

Many targets of online takedowns on platforms like Alibaba are mostly small traders. IP rights holders are often frustrated that only the tip of the supply chain is attacked while  sources of the infringing products remain unknown. Exhibitors attending the Canton Fair are usually manufacturers or export trading companies that source products directly from domestic manufacturers. Through booth visits and business discussions, there is an opportunity for IP owners to use the Canton Fair as an intelligence gathering exercise to identify targets for investigation and enforcement. Some also use the surveys to establish business contacts with the infringer as grounds for future in-depth factory visits which will reveal more information like product stock, infringement tooling, assets, etc.

As infringers become more sophisticated, they make infringements difficult to identify through simple online purchases as goods offered on e-commerce platforms may not always be the exact goods sold. In China, notarized evidence can include  “trap purchases” which are required by enforcement and judicial authorities. With infringing products on physical display at the Canton Fair, on-site notarization is a good way to secure such evidence. For design patent infringements, clear photos of target products are useful, as some exhibitors may even sell samples of their products.

Notarization at the Canton Fair can also establish Guangzhou as the venue for litigation as it is the place of infringement, which will take advantage of Guangzhou’s specialist IP courts.

Enforcement at the Canton Fair

To stop exhibitors from promoting infringing products, IP holders can file submissions to the Complaint Center or hand-deliver warning letters to booths and negotiate for settlement.

Enforcement by the Complaint Station

Before the COVID pandemic, the Canton Fair took place for 15 days and was divided into 3 sessions. This usually meant within the 5 days of each session, IP rights holders will need to prepare in advance for surveys and enforcement actions. Around two weeks before the opening of the Fair, the IP holders’ representative agents will apply online for the special intermediary agency license by submitting scanned documents such as power of attorneys, trademark registration certificates, patent certificates and copyright certificates. Otherwise, the Complaint Station will reject the acceptance of any complaint.

Evidence gathering should be started on the first day to identify targets. Having lawyers on standby from the opening day can also help IP holders to remove infringing products as early as possible. Once infringement is identified, the on-site lawyer can respond immediately by making a complaint to the Complaint Station and filling a Letter of Complaint.

After accepting a case, officials from the Complaint Station will inspect the goods in the suspect’s booth. If infringement can be identified during on-site checks, the officials will request the exhibitor to present relevant IP rights or authorization documents as a defence. If the exhibitor cannot immediately prove their legitimate IP rights, they must withdraw the alleged infringing goods. They are given one working day to submit evidence as a defence. If the exhibitor fails to provide a defence (e.g. non-infringement), the officials will cover the allegedly infringing items or affix seals to them and request the exhibitor stop displaying these items during the rest of the Canton Fair. In cases where the exhibitors are not cooperative, the officials have the power to temporarily seize the allegedly infringing goods. However, the exhibitor can get them back at the end of the last day of the Canton Fair.

IP holders may be disappointed that the Complaint Station do not punish infringing exhibitors by imposing fines, compared with a normal administrative enforcement case in which the infringing goods will be confiscated without compensation and imposed a fine. In a normal administrative enforcement case, the enforcement authorities have at least three months to investigate and review the evidence and legal grounds before they make a decision. Meanwhile, the Complaint Station is set up only to ensure that infringing goods are not exhibited during the several days of the Canton Fair. Therefore, they do not and usually cannot decide whether IP infringement can be established in the absence of careful and thorough investigation and review. The Complaint Station may not even accept complaints, especially for patent complaints where it is too complicated to determine on the spot, such as large mechanical equipment, internal structure of precision instruments and manufacturing methods of products. It is worth adding that there are often more complaints than can be handled, especially some coming in late. The Complaint Section has to balance dealing with all complaints without taking too long on any one. In essence, the Complaint Station’s role is to prevent offers to the buyers by removing the items from display. 

Article 12 of the Provisions is also worth mentioning. The Complaint Station does not accept a complainant’s repeated complaints on the same IP against the same exhibitor. Many IP holders do not understand why such repeat infringers are not dealt with, but nevertheless the Complaint Station will only deal with an IP infringement for the first time and encourages IP holders to take action outside the Canton Fair through administrative means or litigation. That is the proper solution rather than occupying the limited resources of the Complaint Station. Interestingly, some senior officials pointed out a loophole in this Article and stated that hypothetically, if a licensee or other entity related to the same complainant makes the complaint, this rule may no longer apply. However, this has not occurred so far in practice.

Nonetheless, there are still consequences for infringing exhibitors. If the exhibitor fails to execute a valid judicial judgement or administrative decision by displaying the same infringing goods and promotional materials, the exhibitor may be permanently disqualified to participate in the Canton Fair. For exhibitors who fail to withdraw infringing goods from display after a request from the Complaint Station, the officials can confiscate those items and directly dispose them when the Canton Fair ends. For exhibitors who infringe multiple IP rights at the same session and for repeat exhibitors at different sessions of the Canton Fair, there are rules in the Provisions for the reduction of booth numbers for their affiliated trading delegations and the disqualification of exhibitors from the Fair.

On the last day of each session of the Canton Fair, the complainant will receive a written reply for each case from the Complaint Station. If an IP holder plans to sue an exhibitor after the Fair, the written reply along with the on-site evidence, including photographs, audio and videos, samples and infringement records obtained by the Complaint Station, can be directly accepted by court.

Case example:

In an article by China Reports on the 126^th Canton Fair in 2019, the famous Japanese brand “HELLO KITTY” was infringed by exhibitors. The Complaint Station handled the disputes efficiently and was praised by the Japanese brand owner many times which extended its gratitude and appreciation to the Canton Fair by presenting them with carton badges, plaques, red flags and letters of appreciation for their continuous efforts.

The American Travel Century company and the American Company ADDICTION also made special visits to the Complaint Station of the Canton Fair to present plaques of appreciation and express their confidence in the IP protection system.

(Source: http://cxzg.chinareports.org.cn/cxqy/2019/1105/15647.html)

The IP holder can also apply to court for preliminary injunction against an exhibitor from infringing at the Canton Fair. According to item (4) of Article 6 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in Reviewing the injunction Cases involving Intellectual Property Disputes (effective on 1 January 2019), an injunction can be granted by court within 24 hours upon application by plaintiff at time-sensitive occasions such as a trade fair if the applicant’s IP is being or is on the verge of being compromised. In practice, judges are very cautious in awarding preliminary injunctions, so a strategic plan and good preparation before the Canton Fair is crucial to win the favour of the court.

Case example: 

At the ITMA ASIA + CITME Fair at the Shanghai International Exhibition Centre in 2012, a Belgian IP owner identified a Guangdong company displaying a loom, the design of which was highly similar to that of its own design patent. The Belgian IP owner immediately applied to Shanghai No. 1 Intermediate People’s Court for an injunction requesting the exhibitor to immediately stop selling and offering for sale the loom. The Court reviewed the application on the same day and ruled the defendant must stop selling and offering for sale the alleged infringing product within 24 hours. A few days later, the Court was notified that the defendant refused to execute the injunction and continued displaying and selling the target product. The Court together with the enforcement authorities went to the Exhibition Centre to execute the injunction but encountered obstruction and confrontation. The judge and police then detained the parties involved in the breach of the injunction to the Court and imposed fines and detention.

(Source: http://blog.sina.com.cn/s/blog_8c78020f0101cwaj.html )

Warning Letter and Negotiation

If an IP holder identifies more than 10 alleged infringing exhibitors, it is advisable to take a different solution. They should make an official complaint to the Complaint Station against at most 10 targets, but then deliver warning letters to and negotiate through their IP advisors with the other exhibitors to stop the infringement immediately. This is because the Complaint Station receives many complaints every day, and they handle cases sequentially so that many cases cannot be dealt with as soon it is filed. There are only 5 days in each session of the Canton Fair, so time is of the essence for IP holders to stop infringements as soon as possible. Therefore, an enforcement strategy that combines filing official complaints and delivering warning letters is often adopted by IP holders that encounter multiple infringements at the Fair in order to achieve the maximum deterrent effect.

Case example:

For many years, we have provided investigation and enforcement services for a luggage brand at each session of the Canton Fair and achieved great results. The client holds multiple trademark, design patent and invention patent rights.

Through our first-day survey, we found that there were over 50 exhibitors displaying luggage that were suspected of IP infringement at the Canton Fair.  Among all of the infringers, we would choose up to 10 cases that were legally undisputable and relatively serious infringements to file a complaint to the Complaint Station on the second day. After submitting the complaint documents to the officials, our attorneys would then walk through the rest of the allegedly infringing booths to hand-deliver warning letters and negotiate with the exhibitors. Most exhibitors would cooperate upon receiving the letters and removed infringing items from display in front of our attorneys and sign an undertaking promising not to infringe again in the rest of the Fair as well as in the future. However, some infringers might not commit to their promises and put the infringing luggage back into display after our attorneys left. Our solution to this situation was to conduct rechecks every day until the session ends. Once we discovered exhibitors infringing again, we would request them to withdraw the infringing products by threatening to bring the case to the Complaint Station, the consequence of which would be being blacklisted in the organizer’s IP infringement database system and even being permanently disqualified from attending the Canton Fair. Depending on the situation, there were some cases that we did escalate to making official complaints for handling after the exhibitors failed to stop their infringement after private negotiations.

At the 125^th Canton Fair in 2019, we identified 47 exhibitors that infringed the client’s invention patents and design patents. 12 cases were successfully handled by the Complaint Station and the other 35 received our warning letters and oral requests to stop the infringement. We conducted rechecks and re-warnings until all the booths were clean with no infringing items back to display throughout the session. We also obtained a compensation of RMB 10,000 (US$1,485) from a state-owned trading company that was afraid of being blacklisted or disqualified from the Canton Fair.

What is worth mentioning is the importance of continued attacks on IP holders with multiple IP rights and whose products are so popular in the market that there are always copycat manufacturers and distributors. In each session of the Canton Fair, these IP holders may face some familiar parties who show the same infringing items and cooperatively withdraw them upon oral warnings each year. After continuous action on part of the IP holders, however, the number of repeat infringing exhibitors have mostly reduced.

Follow up after the Canton Fair

Information obtained from the Canton Fair is valuable intelligence for IP holders to analyse and work out their next steps against the infringers. A database of infringing exhibitors can be set up to record infringers, which will help IP holders to analyse infringement trends and predict potential infringements at the next Canton Fairs.

In-depth investigations through email or telephone calls and visits to physical premises can be arranged to obtain more information about the scale of infringement, online and offline distribution networks, exporting ports, destinations and to obtain evidence for potential administrative enforcement, civil litigation, or criminal enforcement.

Case example:

Callaway Golf is a world-famous golf product manufacturer. At the 121st Canton Fair in 2017, Callaway Golf identified a hat company that used its registered Callaway trademark in its promotional materials, so they made a complaint to the Complaint Station. The case concluded with the hat company signing an undertaking to never infringe their products again and if violated, they will pay Callaway Golf RMB 1 million as compensation. At the 123^rd Canton Fair in May 2018, Callaway Golf once again found the hat company using its Callaway trademark in a brochure and sued the infringer at Guangzhou Haizhu District People’s Court for damages of RMB 1 million for breaching the undertaking.

The Court ruled that although there was no trademark infringement as the defendant did not use Callaway Golf’s trademarks on its website and promotional brochures, the act constituted as unfair competition because the company used the trademarks to mislead the consumers into thinking that Callaway Golf was their client. In respect of damages, the Court supported the plaintiff for the full amount of RMB 1 million as that the undertaking was signed by the defendant with intent and should be binding in the absence of other evidence by the plaintiff and illegal profits by the defendant. The defendant appealed to the Guangzhou IP Court claiming the damages awarded were too high, but the Guangzhou IP Court upheld the first instance judgement. 

The impact of the COVID Pandemic on the Canton Fair

IP rights should still be protected at the online Canton Fair. As the COVID pandemic prevents many buyers from travelling, on 14 June 2020, the China Foreign Trade Centre issued the Complaint and Settlement Provisions for Suspected Intellectual Property Infringement in the Online Canton Fair. According to this, IP disputes can only be handled through online means. Complaints can be submitted to the online Complaint Station (OCS) on the Canton Fair official website at www.cantonfair.org.cn. After receiving a complaint, the OCS will email the alleged infringing exhibitor about the complaint and request them to respond within 24 hours. If the exhibitor withdraws the alleged infringing products within 24 hours, the OCS will not decide on infringement. If the exhibitor responds with evidence of non-infringement, the OCS will review the case and decide whether there was infringement or no infringement before they will notify both parties. If OCS establishes that there is infringement, it will remove the infringing items from further exhibitions. If the exhibitor fails to respond within the timeframe, the OCS will first remove the alleged infringing products and simultaneously review the merits of the case: if infringement can be established, the products will remain removed, while if infringement cannot be established, the products will be put back online for exhibition. The OCS will keep the evidence on record to be provided upon request to administrative enforcement authorities or courts in any later proceedings outside the Canton Fair.

With the Canton Fair now being held online, there are inherent challenges for the OCS in deciding IP infringements. For straightforward trademark and copyright infringements, the OCS can review the images to make a decision. In terms of patent infringement, however, the OCS is unable to handle utility patent and invention patent cases if no physical products can be provided for comparison purposes as they are usually essential in considering such cases. For design patents, the OCS can handle the complaints if clear photos are provided. The new online Provisions request exhibitors to upload at least 7 clear photos of each product, including the main angle and six other angles as described in the design patent certificate. This is required in order for the OCS to make comparisons when such disputes arise. In reality, this request may be a challenge for exhibitors that may not understand the purpose of the request and therefore fail to take the photos that meet the patent standards. Without clear photos, the OCS may not be able to make a good comparison between the alleged infringing product and the design patent certificate.

As a result, the number of IP disputes handled during the online Canton Fairs are far fewer than the normal offline sessions. In the 127^th and 128^th online Canton Fair in 2020, IP owners are conducting fewer surveys and fewer enforcement cases. Combining online complaints to the OCS and sending warning letters directly to exhibitors’ email addresses is nonetheless very effective. We found exhibitors to be cooperative and altogether 31 infringing listings of 12 exhibitors were successfully removed for various clients, an indication of a good success rate.  

Conclusion

There is no doubt that Canton Fair will remain as the most important and biggest export trading exhibition in China and probably in the world. A strategy involving careful planning and preparation, intelligence gathering, evidence and enforcement, and a thorough analysis of data and follow up actions is recommended to IP holders to make full use of the Canton Fair in protecting IP rights.

[1] Source: http://cxzg.chinareports.org.cn/cxqy/2019/1105/15647.html